7 days

7 Days is a weekly round up of developments in pensions, normally published on Monday afternoons. We collate this information from key industry sources, such as the DWP, HMRC and TPR.

In this 7 Days

Draft State Pension (Amendment) Regulations 2016 published

The draft State Pension (Amendment) Regulations 2016 were published on 20 January 2016.  They set the full rate of the new State Pension (£155.65 per week) by amending the State Pension Regulations 2015.

The full rate of the new State Pension will apply to those who reach SPA on or after 6 April 2016.

The Pensions Act 2014 (Pension Sharing on Divorce etc) (Transitional Provision) Order 2016

The Pensions Act 2014 (Pension Sharing on Divorce etc) (Transitional Provision) Order 2016 was made on 14 January 2016.  The Order makes transitional provisions which allow for the continuation of State Pension sharing on divorce or nullity of a marriage, or dissolution or annulment of a civil partnership, for people who reach state pension age on or after 6 April 2016 and who are entitled to the new State Pension at the transitional rate.  The provisions also make amendments to existing legislation to distinguish rights to an old State Pension which are shareable from rights to a new State Pension which are shareable.

The transitional provisions have effect where proceedings involving the sharing of State Pension have been issued or presented before 6 April 2016, allowing the existing legislation – the Welfare Reform and Pensions Act 1999 – to continue to apply.

The Order will become effective from 6 April 2016, alongside the new State Pension.

Bank of England and Financial Services Bill 2015-16

The Bank of England and Financial Services Bill 2015-16 had its third reading in the House of Lords on 20 January 2016.  Parliament has also published a consolidated version of the Bill which incorporates changes agreed in the House of Lords, together with explanatory notes.

The Bill was introduced for its First Reading in the House of Commons on Tuesday 19 January 2016 – a formality only, and without debate.  The Second Reading – the first opportunity for MPs to debate the main principles of the Bill – is due to take place on 1 February 2016.

The reforms set out in the Bill include measures to increase the scope of Pension Wise, by extending the provision of guidance to pensioners considering selling or transferring their annuities when this is eventually introduced (the proposal was delayed in the Summer Budget from 2015 until 2017 – see our Alert).  HMT will specify by regulation which annuities come within the scope of the provision, and what interest an individual must have in an annuity to be entitled to receive guidance.

Pension Schemes Act (Northern Ireland) 2016 receives Royal Assent

The Pensions Schemes Act (Northern Ireland) 2016 received Royal Assent on 15 January 2016.  The Act largely mirrors the Pension Schemes Act 2015, containing provisions in relation to defined ambition, introducing the concept of “collective benefits”, and making consequential changes in relation to these areas.

Amongst other technical changes, it removes the statutory requirement for regulations to provide that the Regulator compile and maintain a register of trustees, and makes changes to subsisting rights legislation to ensure members are protected against detrimental modifications to rights in a shared risk or DB scheme.

Chancellor announces cap on excessive early exit charges

On 19 January 2016, Chancellor George Osborne announced proposals to place a duty on the FCA to cap excessive early exit charges facing those wishing to take advantage of pension freedoms.

Legislation will establish the new duty, which forms part of the Government’s response to the pension transfers and early exit charges consultation launched in July 2015 (for further details please see our Alert).  FCA data collected through the consultation showed that nearly 700,000 (16%) customers in contract-based schemes who are able to flexibly access their pension face potential early exit charges.

The FCA will be responsible for setting the level of the cap and is expected to consult on this shortly.

Home Office publishes Survivor Pensions FAQs

The Home Office published a “FAQs” document entitled “Survivor Pensions – Police Pensions Regulations” on 20 January 2016.  The document answers frequently asked questions about the changes to survivor benefits under the Police Pensions Regulations 1987 and the Police (Injury Benefit) Regulations 2006.

MoJ publishes note on the implementation of the Fee-Paid Judicial Pension Scheme

On 21 January 2016, the Ministry of Justice (MoJ) published a statement, informing former and current fee-paid judicial office holders what steps the MoJ is taking to introduce a fee-paid judicial pension scheme, in response to the UK Supreme Court’s judgment in O’Brien.

The statement notes that the planned implementation of the new scheme by 31 March 2016 “is no longer feasible”, but anticipates that the scheme will be implemented by 1 December 2016. However, this is subject to the outcome of consultation into the regulations that will establish the scheme, and/or any ongoing litigation. The MoJ will continue to offer interim payments to eligible fee-paid judicial office holders during this period until the introduction of the new scheme.

NEST issues rule change consultation

On 20 January 2016, NEST issued a consultation on proposed changes to its scheme rules.  The changes are intended to bring aspects of the scheme into line with recent pensions legislation, and take account of the lifting of the restrictions on NEST from April 2017 (removing the limits on transfers into and out of the scheme and the level of contributions that can be paid into it).  The proposed changes will also give the Trustee of NEST powers to pay out additional types of benefit to NEST members, in line with the “freedom and choice” options.

The consultation runs until 21 March 2016.

PASA releases the first tranche of guidance on GMP reconciliation

PASA released its first tranche of guidance on GMP reconciliations on 20 January 2016.  The guidance aims to help schemes as they seek to develop appropriate scheme specific strategies in relation to GMPs before the end of DB contracting-out from 6 April 2016.

Geraldine Brassett, Chair of the PASA GMP Working Party, said: “The time left for administrators to act before the cessation is beginning to run short and there is increasing pressure on them to analyse what needs to be done, and to plan and deliver this work […] It is never too late to get started but it is vital that those who have not yet got to grips with what is required take action soon because of the strong likelihood of intense pressure on resource

Phase 2 of the guidance (focussing on how to approach correction of benefits) is expected to be published during February 2016.

PPF publishes updated guidance for Restructuring and Insolvency Professionals

On 20 January 2016, the PPF published an updated version of its “General Guidance for Restructuring and Insolvency Professionals”.

The PPF works closely with TPR to ensure any scheme entering the PPF is the subject of an actual or inevitable employer insolvency.  The guide sets out the criteria that should be incorporated in any proposals made in respect of an insolvent employer, and provides information on the roles and responsibilities of insolvency practitioners throughout the PPF assessment process.

Further guidance on specific areas of interest is expected during the course of 2016.

The Queen on the application of Fleet Maritime Services (Bermuda) Limited v The Pensions Regulator

An employer, Fleet Maritime Services (Bermuda) Limited, contested TPR’s opinion that crew which spent a significant proportion of their employment in foreign waters needed to be automatically enrolled into a pension scheme.  The judge considered that, to determine where an individual ordinarily works, it is necessary to look at where their tours of duty begin and end (known as the “base test”).

For full details, please see our case report.